The Ambassador in Brazil (Caffery) to the Secretary of State
[Received February 23—3 p.m.]
70. Department’s 36, 7 p.m. and 38 , 8 p.m., February 21. …
Aranha has repeatedly told me that he was proceeding on the premise that the United States Government would welcome reestablishment of the principle of paying even if the initial scale of payments were small, it would be a beginning at least: No agreement would be made: The Brazilian Government would unilaterally and voluntarily resume payments on a reduced scale.
Of course it is possible that Brazil’s foreign exchange situation will be much better in a year or two if the war continues and it then might be easier to secure a more satisfactory settlement than now.
Aranha referred yesterday to the Colombian debt agreement12 and said Brazil would gladly make a similar one leaving aside the state and municipal debts.
He remarked with asperity on what he termed the different attitudes of the European bondholders council on the one hand and ours on the other. Incidentally the French have acceded to the Brazilian view of the gold clause in franc loans.
His manner was discouraged but he promised to look once more into the situation.[Page 577]
The Director of Exchange informs me that the British want to negotiate a clearing agreement with Brazil: As the Department is aware recent British war purchases have turned a favorable British balance of trade into an unfavorable one.